Question

7) Black Pearl, Inc., sells a single product. The company's most recent income statement is given below. Sales $50,000 Less variable expenses (30,000) Contribution margin 20,000 Less fixed expenses (12,500) Net income $ 7,500 Required: a. Contribution margin ratio is 40% b. Breakeven point in total sales dollars is $ 31,250 c. To achieve $40,000 in operating income, sales must total $ 131,250 d. If sales increase by $50,000, operating income will increase by $ 20,000 e. To achieve a $40,000 after tax income, given a tax rate of 20%, sales must total $ _______

          7) Black Pearl, Inc., sells a single product. The company's most recent income statement is given
below.

Sales	$50,000
Less variable expenses	(30,000)
Contribution margin	20,000
Less fixed expenses	(12,500)
Net income	$ 7,500

Required:
a. Contribution margin ratio is	40%
b. Breakeven point in total sales dollars is	$ 31,250
c. To achieve $40,000 in operating income, sales must total	$ 131,250
d. If sales increase by $50,000, operating income will increase by	$ 20,000
e. To achieve a $40,000 after tax income, given a tax rate of 20%, sales must total $ _______

Show more…

7) Black Pearl, Inc., sells a single product. The company's most recent income statement is given
below.

Sales 50,000
Less variable expenses (30,000)
Contribution margin 20,000
Less fixed expenses (12,500)
Net income 7,500

Required:
a. Contribution margin ratio is 40%
b. Breakeven point in total sales dollars is 31,250
c. To achieve40,000 in operating income, sales must total 131,250
d. If sales increase by50,000, operating income will increase by 20,000
e. To achieve a40,000 after tax income, given a tax rate of 20%, sales must total $

Added by Toni C.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Akash M

09/18/2023

Step 1

The contribution margin ratio is calculated by dividing the contribution margin by the sales. In this case, the contribution margin is $20,000 and the sales are $50,000. So, the contribution margin ratio is 20,000/50,000 = 0.4 or 40%. b. The breakeven point in Show more…

Show all steps

lock

Thanks for your feedback!

Play audio

Feedback

Powered by NumerAI

Akash M and 68 other subject Principles of Accounting educators are ready to help you.

Ask a new question

Labs

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs

Recommended Videos

Recommended Textbooks

Transcript

Ace is your personal tutor. It breaks down any question with clear steps so you can learn.

Start Using Ace

Continue solving this problem

Create a free account to:

View full step-by-step solution
Ask follow-up questions with Ace AI
Save progress and study later